The reason I used Lauda was to illustrate that full flights do not equal profits and that tag-on segments are mostly not profitable either. They are mostly a relict from the regulated era, partly demanded by major corporations to circumvent local airlines or customs, but normally do make any sense financially.

Not surprisingly, the vast majority of them is not operated anymore. Hence, it is not surprising that Qantas followed the approach of LH or AF. Flying long-haul routes into hubs of partners to let them spread the traffic locally.

The problem for Qantas is obvious. I do see demand from Germany to Singapore and Bangkok, so again the mix between connecting pax and O/D pax is working and probably more rewarding financially that on Qantas from Australia to DXB. On these routes, I see a far higher percentage of passengers connecting onwards on Emirates..., resulting in significantly lower yields.

There is no doubt that a growing DXB Metro region is benefitial for Emirates and I am sure that the O/D demand for certain destinations increased as well, but again the location of DXB and yield of many passengers is difficult.

Hence, it is of utmost importance to keep the costs as low as possible, however legacy costs are a side-effect of becoming older as a corporation. ;)

So I see a major conflict, the necessity to keep costs as low as possible and the desire to use Emirates as a standard for excellence, which brings us back to Lauda. Excellent service, poor financial results. :)

But as pointed out before, EK put DXB on the map, the brand Dubai has been influenced by Emirates to a certain point, maybe not as much as the Singapore Girl painted a picture of Singapore, but still to a certain extend, certainly in combination with artificial islands or a very tall building and some malls.

If you achieve something like that, do you really care whether you lose some hundred millions a year from operating aircraft.

Some time ago, a well informed writer from Germany predicted that Etihad lost around 800 million from ops in 2013, IIRC. Might have been 2012 and 700 million, I really do not remember 100%.

Again, I do not care how much they lose, I just care whether their business model has anything LH or AF could copy. Of course, without losing quite some money without getting any higher return. ;)

Why bring Etihad into this? I don't think anyone will dispute that EY has received financial support to establish itself as an airline. If you have to compete against EK do you think you could fly around 10 aircraft for 5 years and hope to build up your airline from there?

You are also trying to compare apples with oranges. The carriers in the Middle East have advantages that the EU carriers do not, at the same time the EU carriers have their own advantages over other carriers. So trying to replicate the LH business model in Dubai will not work either as the routes and profiles of customers available is different. At the same time trying to replicate the Delta model in Europe will not work as well as again your customer base and what their expectations are different.

I don't see how Lufthansa flying to SIN or BKK is relevant. Qantas were partnering with BA ex Singapore into Europe. leading to 2 stops and being at a disadvantage to both Singapore airlines and the Middle East carriers. This year they have significantly improved their profit so I don't see how the EK partnership has reduced their yields compared to what they were doing before. Australia has a population of 20m and on a per capita basis Qantas is probably doing better than the US carries for profit with most of their international business being long haul which on your logic would be almost 100% loss making.

As has been said before: the fundamental point of difference is whether one thinks there is a plausible amount of yield and capacity on the various routes to cover costs to evaluate whether an airline can be profitable from ops - and costs we can give a variety of plausible normal market conditions for since we know fuel costs in the market and the specification of aircraft. All we need to do is calculate the maximum fuel cost for a sector (which is capped at the fuel tank capacity), and then assign pro-rata the cost of the airline's operations on a per sector basis, giving us breakeven revenue required. Of course this is a bit rough, as some routes are higher margin than others so some parts of the network might be able to patch losses in other parts - so what we do is make a reasonable assumption that the longest routes using the most fuel are the lowest margin routes on the entire network, and if we can make the sums work for those routes, other routes can only be more profitable.

Then we create a range of models for each percentage fuel cost and then we see whether you can achieve yields and load factors to hit your required revenue number. Given some plausible real life conditions, we can show that it's very, very difficult, but possible, for some ULH routes. Thus the problem becomes, how plausible is it to hit those breakevens all year round.

FD1971's experience in the German market suggests he views EK as a carrier that achieves low yields and doesn't have any fat margin routes or high yield pax that can sustain routes that simply don't work if 80-85% of pax are on discounted economy fares. Other posters believe that EK does in fact command pricing premium on some routes - enough that the airline might eke out 3-4% net margin. If this was an operation that existed to focus on generating profits, I think shareholders would be unhappy at that kind of margin. However as is obvious, the shareholders have a dual mandate for EK, which is also to promote Dubai so that kind of return is seen as acceptable.

One could infer fuel costs that EK takes on ULH routes with an A380, such as the US routes from their redemption surcharges of 500-700 USD a sector. When they sell a round trip for 900 USD in Y, you know that's a loss. The question is, can they sell enough 10k a sector J-F fares to make up for it, all year round. Many people are sceptical of this, but that is the crux of the question!

btw, I did some sums for the A340-600 going AUH-SYD: 50000 US gallons at 2 USD a gallon, using EK's cost structure as a guide for EY, makes that sector cost 330k USD. With a 12/32/248 capacity, and assuming 90% of that is ex-Europe connecting pax, looking at fares roughly they can get max revenue attributable to that sector of 2/3 of the fare by distance, which currently works out at: (12*2500+32*1500+248*500)*0.90 = 181k USD. So I think EY's case is pretty open and shut at this point :D However, when you start putting 14/76/399 and 8/42/310 aircraft up there with costs running at 600k USD and 310k USD, it starts to get slightly more palatable - if you can push average cabin yields up above discount fares by around 40/50%, which you can do if your flex fares are double your saver fares. That's admittedly to outside observers a big if, as EK market themselves as being relatively good value. But I suspect that there are enough people on this forum who can complain about paying ULH flex prices!

I'm not sure if we should talk about QF given their profits from aircraft operations are all negative or breakeven at best - it's sustained by vast loyalty scheme profits!

The USA airline labor-management "Fair Skies" website has launched. Their video, while somewhat xenophobic, goes right after Emirates as is extremely persuasive. Unless Emirates can prove these are lies, they are toast -- at least when it comes to Open Skies.

http://fairskies.org/

Thanks for linking the video, OP - for those who haven't watched it (it's an embedded youtube video), it is as predicted on this thread: going hard after EK with a combination of technical truths, implying nefarious dealings with no proof and then making a guilt-by-association argument with EY and QR, then a "save our jobs" appeal at the end.

To wit:
- First slide, "40 billion in subsidies" (still unsubstantiated and no context)
- talking about the relationship between Dubai's ruler and the Emirates Group owner, then helpfully referring to them both as "Sheikh Al-Maktoum" to be transparent :D, but omitting EY and QR's ownership structure
- implying that the Dubai Civil Aviation Authority is the regulator of EK (whereas that's the UAE GCAA)
- saying that the Chaiman of EK also runs the "Dubai Government Bank" (what is this - any resident care to enlighten us? Is this EmiratesNBD?) "interest free loans are not a problem" - unsubstantiated accusations again
- "Sheikh Al-Maktoum" (which one is this now?) also chairs ENOC which "supplies oil to his airline": although if you go to DXB all you see are BP, Chevron and Exxon filling up the planes...it's not as if Dubai has any oil or refinery capacity anyway...well. Jebel Ali refinery can fill maybe, 8 A380s a day, if they are lucky (120kbpd raw capacity)...
- unsubstantiated claims of fuel hedge loss absorption and "airport landing charges" (no elaboration)
- then there is an immediate segue (with the motifs of the last minute about EK still on screen) into the practices of EY and QR and their owners, without mentioning either of those airlines by name
- repetition of the "40 billion" number
- also a claim quoting the WSJ that US airlines have received 0 USD in subsidies since 2004...

I agree with you OP, actually, if EK doesn't get onto the lobbying trail quickly, they are toast in the court of US legislator opinion in the run up to an election season...! And we already know the Administration and Congress are not on the best of terms...

We have just seen IAG profits buoyed by fat margins on TATL - without the cash cow of TATL for both sides of the US-EU antitrust immune JV, there may indeed be the job losses (or shall we more accurately say, the loss of expensive jobs and benefits) that the US unions fear...!

It's only persuasive to those who are superficial and oblivious to the most basic of logic. There's nothing to see here.

The fact that you used the term 'extremely' makes me want to puke.

You underestimate the capabilities of the USA airlines. This is a very sophisticated operation they have going. Are some things "shaded"? I assume so -- it's politics. But I guarantee you they aren't making baseless accusations. They've got the goods on Emirates. And, as I've said from the beginning, there HAS to be "goods" because Emirates business model is impossible.

...which, we are still waiting to see. Why do you think they are holding "the goods" back, by the way?

There's apparently a press conference tomorrow.

As I said, I'm sure they've got something, because these businesses couldn't possibly work without massive subsidies. Poke around that website's "In the News" section for more stories. Like the piece by Holly Hegeman. She's a very good airline financial analyst. If she's saying it's a sham, the odds are near 100% that it is (especially when you apply common sense).

USA isn't exactly the top destination for libel tourism. Interesting to see how Emirates will respond, if they do.

DCAA, as mentioned, is not the safety regulator. (Though I have to admit, the mirror scene cracked me up).


Sheikh Ahmed's actually a pretty nice guy. He also happens to be chairman of Dubai World. Remember the ports controversy from 2006? The only reason they decided to give up and sell the port operations to AIG was because of pressure from Abu Dhabi.

Sheikh Ahmed probably understands America well considering he went to college there. I'm willing to bet he'll have the last laugh this time.


Edit: Next to the other embedded video is a link to their infographic - only visible if your screen is wide enough. Here's a link to it if you can't find it: http://fairskies.org/wp-content/uplo.../WSJ-facts.jpg

I have no idea why they're using soccer fields to emphasize their point.

Wait, did that "In The News" section on the fair skies website quote Lucky's onemileatatime boarding area blog post as "News"? :D

http://fairskies.org/2015/02/carrier...-system-heres/

I eagerly await "the goods" - especially if it turns out to be as seriously impartial and in depth and thorough as blog-posts-as-news journalism that has been cited so far :D

EDIT: Holly Hegemony did retweet an wry point though, I'll admit:
https://twitter.com/planebusiness - Mar 2 retweet:
https://twitter.com/LAflyr/status/572547659321380864

I wonder what Boeing think of all this nonsense?

Probably cranking up their lobbying machine to protect Ex-Im bank funding from the meddling of Congress...!